Bid for interim government as PM drops referendum

Talks are expected to take place between government representatives and New Democracy officials on Thursday afternoon with a view to form a transition government after the ruling PASOK party reacted negatively to Prime Minister George Papandreou?s bid to hold a referendum on whether Greece should remain in the euro.

Sources said that two government officials would meet with members of the main opposition party to discuss the formation of a new government. The move came after New Democracy leader Antonis Samaras indicated he would be willing to discuss possible cooperation with a view to elections being held in the near future.

?The new government that will emerge from this election will unite the people… so that the country can come out of the crisis,? said Samaras.

The talks were prompted after opposition within the Cabinet and among PASOK MPs to Papandreou?s referendum proposal. At the beginning of the week, the prime minister had suggested a plebiscite to decide whether Greece should adopt the latest bailout deal agreed with the eurozone. However, following tense talks with German Chancellor Angela Merkel and French President Nicolas Sarkozy, Papandreou said the vote would be on whether Greece should stay in the euro.

This led to a number of his ministers, including Finance Minister Evangelos Venizelos, saying they would not accept a referendum on this issue. Several MPs also objected. This rebellion appeared to put Papandreou’s premiership in severe doubt but it seems that the prime minister has not offered his resignation.

Government spokesman Ilias Mosialos confirmed Papandreou was not stepping down and planned to address PASOK MPs this afternoon. Instead, it appears the prime minister has suggested the creation of a short-term coalition, possibly made up of and led by non-political figures, to ensure Greece receives its next loan tranche of 8 billion euros with the pledge that elections would be held soon afterwards. The name of former European Central Bank vice president Loukas Papademos has been linked with the post of prime minister in the interim government.

Mosialos said that Papandreou had withdrawn his bid for a referendum and that, as things stand, the confidence vote he called for would still take place in Parliament tomorrow.